The practical implications of the CSOS Act (Act 9 of 2011)

The Community Schemes Ombud Service Act became effective on the 7th October 2016. This legislation applies to all community property schemes including Sectional Title schemes run by bodies corporate; estate and cluster developments run by home owner associations (NPC or voluntary associations); shareblock schemes; retirement villages and housing associations.

The primary objectives of this legislation are to provide a cost and time-effective dispute resolution service through an Ombud Service; provide a single legislative code to apply to community schemes and to regulate and archive important governance documentation for the properties concerned (eg rules, audited financial statements, MOIs), thus making these documents more accessible to buyers, sellers, banks and other relevant stakeholders.

The initial compliance requirement is for community schemes to register with the CSOS Ombud by the 6th November 2016 and registration is easily achieved by the scheme appointing an authorised representative (by resolution signed by two trustees or directors) and thereafter submitting a prescribed application form together with certain governance documentation. Registration is free and applications may be submitted by email to registrations@csos.org.za.

Registration will be confirmed by the issuing of a registration certificate and the necessary governance documents then need to be submitted by the 6th January 2017 (within 90 days of the legislation being gazetted). Trafalgar will be facilitating the registration of all client community schemes based on the signed authorisation, free of charge. Non-compliance with the CSOS Act is a criminal offence and the executives of the community scheme concerned may be held personally liable.

The CSOS Ombud Service will be funded by CSOS levies charged to all community scheme owners from 1 January 2017. The legislated formula for quantifying the CSOS levy is 2% of the basic levy charge above R500, capped at a maximum monthly CSOS levy of R40 per unit per month (ie [Basic levy – R500] x 2% capped at R40 per month). Special levies, exclusive use charges and security or other recoveries do not apply to calculating the CSOS levy. While CSOS levies will be raised and recovered from community scheme owners on a monthly basis, the CSOS Ombud will invoice the levies for payment on a quarterly basis.

The CSOS dispute resolution service, together with the relevant application form, is explained on the CSOS web site (http://www.csos.org.za/disputeresprocess.html). After exhausting internal dispute resolution mechanisms by discussion and negotiation with the trustees/ directors, an aggrieved party may approach the CSOS Ombud for dispute resolution by lodging the relevant form together with a prescribed fee and there are two dispute resolution options available: conciliation will entail a R50 application fee and an adjudication R100.

Matters will initially be screened for validity and jurisdiction, after which a CSOS official will be appointed to investigate. The CSOS Ombud has given timing expectations of between five and 120 days for resolving disputes, depending on the complexity of the matter. A ruling from the CSOS Ombud will be enforceable in the Magistrate’s or High Court depending on the nature and quantum of the order and will only be able to be appealed in court on a valid point of law. So far over 80% of the approximately 6800 matters already referred to the CSOS Ombud have related to arrear levies. While the service aims to deliver a more efficient and cost-effective dispute resolution service, capacity and performance in this regard have still to be tested.

Any changes to the rules of a community scheme will need to be reviewed and authorised by the CSOS Ombud before these are enforceable. This only applies to Sectional Title and not all community schemes. Changes stipulated by the CSOS Ombud will require a new special or unanimous resolution to update the rules for final review and approval. Fines and any other items to be raised on owner levy accounts will need to be clearly specified in the approved rules to be enforceable. It is Trafalgar’s recommendation that conduct rules are updated to allow debt collection, legal fee and other reasonable penalty charges to be recovered from owners based on the provisions of the rules.

Finally, fidelity insurance cover is now required by community schemes, to adequately insure the reserves and administrative fund and safeguard against fraud, which is a significant risk considering the value of the funds involved. Trafalgar has existing R20m fidelity insurance cover (per claim) which the CSOS Ombud has advised is sufficient for all Trafalgar managed properties for complying with this provision. This is an important value-add included in Trafalgar monthly management fee.

For any further information, or to review frequently asked questions, obtain more details about training material or find links to the source legislation documents, please visit www.trafalgar.co.za/newlegislation

One Response to The practical implications of the CSOS Act (Act 9 of 2011)

Dear Sir/Madam
As new owners of a sectional title unit in Margate we are concerned about the new act by government. The info obtained on your sight has been enlightening. My husband is acting trustee and he as well as the body corporate have no understanding of the new rules and if they are applicable to us and if we are obligated to register. Would it please be possible to ask for your help?? Thank you kindly